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Trading Blog Tuesday, October 27, 2020

10/27/2020

UPDATES on GOLD, SILVER, and CRUDE OIL (7:00 pm EDST)

Gold and silver prices continue to be remarkably flat, but there are several technical signals in the charts of both metals now suggesting a bearish downturn is imminent. This downturn could bring gold down close to $1800 and silver close to $21. If this happens, we could see those bottoms within our next strong reversal zone for all markets coming up Nov. 5 - 19 (this is a wide reversal with pivot points around Nov. 10 and Nov. 16). This could turn out to be an ideal spot to buy, so we will watch for it. We are staying on the sidelines of both metals for now.

Crude oil has been falling with the broad stock market. Although crude is in a new medium-term cycle that started with the double bottom lows of Sept. 8 and Oct. 2 at $37 (Dec. contract chart), it may have peaked early with last week's high of $41.90 (or even the Sept.18 high of $42.02) and could be turning bearish. If prices start to fall below $37, that bearish scenario will be confirmed, and we may have to switch to a short-selling trade strategy. Any rally now that can break clearly above $42 will negate this bearish view and turn the trend bullish again. For now, we will remain on the sidelines of crude.

Trading Blog Monday (late night), October 26, 2020

10/26/2020

UPDATE ON THE BROAD STOCK MARKET (11:30 pm)

The cycle labeling of the DOW and S&P 500 are still in question. Last week's charts were relatively flat and showed no upward momentum. That, combined with today's steep drop, is a bearish sign suggesting these may be older medium-term cycles now heading to their final bottoms, possibly in the first two weeks of November. Although the NASDAQ 100 (E-Mini, Dec. contract chart) is most likely a newer (younger) medium-term cycle, it could peak early and turn bearish as well. If it drops below 10,656 before exceeding its 12,249 high from two weeks ago (Oct. 13), that bearish scenario could be happening. The possibility of a Biden/Harris win in the presidential election a week from now combined with growing doubts that a COVID stimulus package will be released before the election is putting a damper on Wall Street optimism. Unless we see some rallying soon, next week (or the week after) could give us a corrective low in all three indices. If they don't go TOO low, we may have a good opportunity to buy. We will remain on the sidelines of the broad stock market for now.

Trading Blog Monday, October 19, 2020

10/19/2020

UPDATES ON PRECIOUS METALS and CRUDE OIL (7:00 pm EDST)

We are now out of last week's strong reversal zone, We are entering a much milder, weaker reversal zone this week and next (Oct. 19 - 26) which may or may not correlate with a reversal in some markets.

Gold and silver prices both made new monthly highs last Monday in the center of last week's strong reversal zone, so it looks like that was a significant top. Prices have come down from there, but not by much, and both metals have been relatively flat since last Wednesday. The cycle labeling here is still ambiguous until these metals make a definitive move up or down. Ideally, I would like to see prices move lower this week or next for a final bottom in an older cycle. A case of bullish divergence where one metal makes a new monthly low without the other would also be a good sign of a bottom. But if gold breaks above $1932, we may have to give up on that scenario and give these cycles a younger labeling. We will stay on the sidelines of this market for now.

It looks like crude oil started a new medium-term cycle on either Sept. 8 and/or Oct. 2 (double bottom). Either way, a sub-cycle rally should be topping out soon to be followed by a corrective dip. As long as that dip stays above those double bottom lows (around $36.50 - Nov. contract chart), we might look to buy that correction.This market would look more bullish if it could break above its high of $41.72 from Sep. 18 before taking that correction. Let's stay on the sidelines of crude oil for now.

Trading Blog Sunday (late night), October 18, 2020

10/18/2020

UPDATE ON THE BROAD STOCK MARKET (11:30 pm EDST)

The cycle labeling of the DOW and S&P 500 are still in question, so we will stay with our analysis of the NASDAQ 100 (E-Mini, Dec. contract chart) for our general assessment of the broad stock market for now.

All three indices peaked last Monday, but none exceeded their early Sept. high. After falling into Thursday, each index attempted a rally on Friday, but then they all lost their momentum and backed down a bit at the closing bell. Those Monday highs could be significant tops as they happened in the center of a strong reversal zone. However, there was no bearish divergence between the indices (which we like to see at a top), so it's possible for any one (or all three) to push higher this week.

The NASDAQ 100 (Dec. contract chart) most likely started a new medium-term cycle with its low of 10,656 on Sept. 21. It is early in this cycle, but not too early for at least a sub-cycle peak and corrective dip. The high of 12,249 on Monday could have been that peak, unless it pushes higher this week. If this market's trend is bullish, a corrective dip shouldn't go too low and may be a good spot to buy. Around 11,500 might be a good target. A stronger bullish sign would be to see a rally this week above the last cycle high (12,449 on Sept.2). In that case, we would have to wait a bit longer for a sub-cycle correction to buy. I think this market wants to rally into the presidential election. Wall Street seems to like Trump, so his re-election could keep things bullish for awhile (but probably not for long as this market is overdue for a major correction). A Biden win, however, might trigger some sort of sell-off (although it might only be a short corrective dip). We are still on the sidelines of this market.

Trading Blog Monday (late night), October 12, 2020

10/12/2020

BROAD STOCK MARKET and PRECIOUS METALS UPDATE (11:30 pm EDST)

We are now approaching the end of our current strong reversal zone (Oct. 7 - 16) and the broad stock market is clearly rising strongly into it. It should therefore correlate with a cycle top and not a bottom (unless we see a "break-out" instead of a top). It is still unclear if the DOW and/or S&P 500 are new medium-term cycles (probably) or older cycles. We are therefore going to focus mostly on the NASDAQ which appears to be a newer cycle that started with its low on Sept. 21. I am going to use the Dec. contract chart of the NASDAQ 100 (E-Mini) for our analysis of this market.

Even though this cycle in the NASDAQ is new and therefore at least short-term bullish, there is a possibility it will peak early and be followed by a long decline to the final cycle bottom well below 10,500. That peak might even be this week within our strong reversal zone. In this scenario, we would not expect this index to exceed its last peak at 12,449. If the DOW and/or the S&P 500 make new highs without the NASDAQ exceeding 12,449, it might be a good signal to sell short. A subsequent close below 11,000 would help confirm this bearish scenario. New highs in all three indices, however, would negate that bearish view and might have us looking to buy the bottom of a less serious corrective dip in the NASDAQ with that final top being many weeks away. Yes, this is a tricky market right now with several possibilities. We will stay on the sidelines for now until we see a good trading opportunity. That may come sometime this week.

The precious metal cycles are also very unclear at the moment. There are many mixed bullish and bearish technical signals currently at play which make this market very unpredictable. If prices are going to fall to a significant low in this current reversal zone, they will have to do so quickly (by the end of this week). On the other hand, any strong rally this week will be setting itself up for a significant top and subsequent fall. We would still like to see prices drop close to $1800 in gold and $20 in silver, but they might not go that far down. If gold or silver (not both) make a new monthly low this week without the other, it would give us a bullish divergence signal in a reversal zone, and that might be a good buy spot. Things are too unclear and uncertain at the moment to suggest any definitive trading strategy so we will remain on the sidelines for now.

Trading Blog Wednesday, October 7, 2020

10/7/2020

UPDATES on CRUDE OIL and PRECIOUS METALS (5:30 pm EDST)

The cycle labeling in gold and silver is uncertain at the moment (old or new cycles) as it is with the broad stock market (as well as crude oil). Our preferred labeling is that gold and/or silver are completing older cycles and prices are falling to their final medium-term cycle bottoms. For gold, a good target would be around $1800, and for silver, around $20. A good time for these lows would be this week or next - in our current reversal zone (Oct. 7 - 15).

There's a possibility, however, that gold and/or silver started new medium-term cycles with their lows on Sept. 24. If that's the case, prices could rally strongly now as the early part of a cycle is usually bullish. In that situation, we could see a high in this current reversal zone and would have to wait for a sub-cycle corrective dip for a possible buying opportunity. Let's stay on the sidelines of gold and silver for now.

In my last update on crude oil (9/22/20), I stated:

"Crude oil may have started a new medium-term cycle with its low of $36.13 (October contract chart) on Sept. 8. But there is still a chance prices could make a lower low (or double bottom)..."

Well, crude did fall and make a double bottom at $36.63 on Oct. 2, and prices have been rising from there. OK, it looks like a new medium-term cycle is starting here with this "double-bottom"; however, as I stated in the last crude update, if prices rally weakly and can't exceed $44, the cycle may turn bearish. In that situation, we might look to sell short at any sub-cycle top. Such a top could happen this week or next in our current reversal zone or even Oct. 14 - 22 as that will be another reversal zone specifically for crude. A lot will depend on how the broad stock market moves this week or next as crude often follows equity markets. We will stay on the sidelines of crude for now.

Trading Blog Tuesday (late night), October 6, 2020

10/6/2020

UPDATE ON THE BROAD STOCK MARKET (11:30 pm EDST)

We are now about to enter a very important reversal zone (Oct. 7 - 15), and our cycle labeling of the DOW and S&P 500 is still in question. It is starting to look like either one or both these indices started new medium-term cycles with their lows on Sept. 24. If that's the case, we should see more rallying to a sub-cycle top in this new reversal zone that would likely test the Sept. 3 high of 29,199 in the DOW and the Sept. 2 all-time high of 3,588 in the S&P 500. But there's still a chance that these indices will instead fall hard into this reversal zone to form a final bottom to an older cycle (which would be a good spot to buy). We will have to wait a few more days to see if this market wants to continue rallying or take a substantial correction now.

We are changing our labeling of the NASDAQ from an old cycle to a new medium-term cycle that started with the 10,520 low of Sept. 24. This means this index is at least short-term bullish and we should be looking for a corrective dip to buy. That may come in this new reversal zone, but if this market continues to rally, we may get a high instead, and we may have to wait a bit longer for a sub-cycle correction and a good buying opportunity.

Last week's announcement of President Trump's COVID-19 diagnosis sent the broad stock market down, but his quick recovery lifted the market back up yesterday. Today Mr.Trump announced that he would halt fiscal stimulus negotiations until after the election, and this has sent equities down again. Our trading strategies are on hold until this roller coaster settles down a bit and we can see if our new reversal zone is shaping up to be a top or a bottom.

Our longer-term view is still that we will see a major long-term cycle top soon (by the end of this year or possibly early 2021) which will be a major opportunity to sell short as the correction should be very substantial. Despite this bearish view, we could still see a strong short-term rally (possibly even a "blow-off') before that final top and thus opportunities to profit on the long side before the big sell-off. On the sidelines of this market for now.